Deutsche Telecom Chief Describes T-Mobiles Woes

In testimony before lawmakers Thursday on Capitol Hill, Deutsche Telekom Chief Executive Rene Obermann reiterated previous statements that T-Mobile USA has found it increasingly difficult to compete.

The nations fourth-largest mobile operator has faced increasingly fierce competition from a growing number of” companies in recent years, Obermann said. He said those companies include regional carriers, prepaid operators and alternative providers such as Skype, which offers Internet-based calling over landline and mobile phones.

T-Mobile has been caught in the middle of this dynamic marketplace and has had an increasingly difficult time competing,” Obermann said before the House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet during a hearing that examined AT&Ts $39 billion acquisition of T-Mobile USA from Germany-based Deutsche Telekom. We have steadily lost market share over the past two years. In the most recent quarter alone, we lost 471,000 contract customers, while other competitors are growing rapidly.”

Obermann also repeated previous assertions from Deutsche Telekom and T-Mobile USA executives that the U.S. mobile operator does not have a clear path to build out a fourth-generation network based on LTE technology. Both AT&T and Verizon Wireless the nations largest wireless providers are building out LTE networks to offer consumers faster data speeds and support more sophisticated applications on smartphones.

T-Mobile will need to move to LTE to remain competitive but the company simply does not have access to the spectrum needed to deploy LTE effectively,” Obermann said.

Even if spectrum was available to purchase, Deutsche Telekom would need to reallocate funds from our core European operations into T-Mobile USA,” a big challenge in light of Deutsche Telekoms debt and required capital investment in Europe, he said.

AT&T has agreed to pay Deutsche Telekom $39 billion for T-Mobile USA, including $25 billion in cash and $14 billion in AT&T shares.

Deutsche Telekom anticipates having an 8 percent stake in AT&T and using the cash from the merger to reduce its debt by 13 million euros, a Deutsche Telekom executive told the Federal Communications Commission.

If U.S. regulators move to block the merger, Deutsche Telekom wont walk away empty-handed the company has confirmed that AT&T will give the European telecom giant a break-up fee and benefits worth roughly $6 billion, Reuters reported earlier this month.

Bellevue, Wash.-based T-Mobile USA serves 33.63 million customers and is the fourth-largest wireless operator behind Sprint Nextel, AT&T and Verizon Wireless.

In the first quarter of 2011, T-Mobile USA lost 99,000 customers, more than triple the number of losses in the fourth quarter of 2010 (23,000).  Over the last two quarters, the company has lost 789,000 customers on contract.

T-Mobiles struggles could help allay potential concerns at the Department of Justice and Federal Communications Commission that AT&Ts acquisition will harm competition.

AT&T CEO Randall Stephenson told lawmakers that T-Mobile does not exert strong competitive pressure on AT&T, and other providers already fill or could easily move to fill whatever competitive role T-Mobile occupies today.”

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